The Consumer Financial Protection Bureau (CFPB) wants to hear your views on general purpose reloadable prepaid cards. It’s even promoting its inquiry on its home page where you can also get a lot of other good information. CFPB is determining how to improve consumer rights when we use prepaid cards. Business is booming but you have very few protections by law when you use these cards.
Some of the campus cards featured in U.S. PIRG Education Fund’s new report, the Campus Debit Card Trap (featured in the New York Times and numerous other papers, including this Tuscaloosa News piece by Washington Post syndicated columnist Michelle Singletary) are prepaid cards, others are debit cards, and there is a difference.
Reloadable prepaid cards include a Visa or Mastercard logo, but aren’t linked to a bank account, as ATM/debit cards are. Bank account-linked cards come with the protections of the Electronic Funds Transfer Act, prepaid cards do not (some protections may be promised by contract, but not law). While EFTA protection is not as good as the Truth In Lending Act protections that apply to credit cards, it certainly is better than no protections by law, which is what you get with prepaid cards. Fees for the cards, which are lightly regulated, are all over the map, so be careful.
On the other hand, you don’t need to pass a credit check to buy prepaid cards, which can be used in many, but not all, places that a debit or credit card can be used. This FDIC chart explains the differences in rights between card types (the excellent chart notes that gift cards and payroll cards are hybrid prepaid cards, with some additional protections general purpose prepaid cards do not have). Our campus card report goes into a lot more detail.
The CFPB asks you to comment in its Advance Notice of Proposed Rulemaking on prepaid cards. For example, it points out that “Some prepaid cards offer credit features such as overdraft and line of credit.” Yet, many consumers use prepaid cards because their previous bank accounts were overdrawn and they paid high overdraft fees or resorted to high-cost short-term payday loans. Should prepaid cards be a safe harbor from these risky fees?
Tell the CFPB what you think about prepaid cards. By the way, at the CFPB website, you can also file a complaint or just tell your story about any consumer financial product or transaction or ask any question about any consumer financial law or protection. You don’t need to use the Internet. You can call the CFPB at (855) 411-CFPB (2372). The CFPB staff speak many of the world’s languages. More ways for consumers or whistleblowers to contact CFPB are here.
Senior Director, Federal Consumer Program, U.S. PIRG Education Fund
Ed oversees U.S. PIRG’s federal consumer program, helping to lead national efforts to improve consumer credit reporting laws, identity theft protections, product safety regulations and more. Ed is co-founder and continuing leader of the coalition, Americans For Financial Reform, which fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including as its centerpiece the Consumer Financial Protection Bureau. He was awarded the Consumer Federation of America's Esther Peterson Consumer Service Award in 2006, Privacy International's Brandeis Award in 2003, and numerous annual "Top Lobbyist" awards from The Hill and other outlets. Ed lives in Virginia, and on weekends he enjoys biking with friends on the many local bicycle trails.